Business Recorder | 17 November 2025
K-Electric: Govt facing arbitration threat from Saudi, Kuwaiti investors
by Mushtaq Ghumman
The Government of Pakistan is facing a potential threat of arbitration from Saudi and Kuwaiti investors, key shareholders in K-Electric, who have already served a USD2 billion notice on Islamabad, sources told Business Recorder.
If it proceeds, this will be the third international arbitration in the country’s power sector after the cases involving M/s Halmore Power Company and M/s Star Hydropower. A formal notice of dispute was sent by the international law firm Steptoe LLP to the Attorney General of Pakistan on November 12, 2025, under the OIC Investment Agreement relating to K-Electric Limited.
In its notice, Steptoe referred to an earlier dispute notice under the OIC Investment Agreement dated October 20, 2025. A copy of that notice was delivered via courier and email to the Attorney General’s Office, with copies also sent to the Prime Minister’s Office, the Minister for Energy, the Minister for Law and Justice, and the Special Investment Facilitation Council (SIFC).
In the recent notice, Steptoe proposed that the parties enter into negotiations (in place of conciliation) or, alternatively, proceed with conciliation, while reserving their right to move immediately to arbitration. Against this background, the law firm requested that the government provide the contact details of its designated representatives for settlement discussions.
According to the notice, more than three weeks have passed since its service, and as of November 12, 2025, no acknowledgment or substantive response has been received from any representative of the Government of Pakistan. Nor have contact details of any authorized representative been provided to engage in the amicable settlement process contemplated under Article 17(1) of the OIC Investment Agreement. Accordingly, it appears that the parties are unable to agree on conciliation.
“The purpose of this letter is to put the Government of Pakistan on notice that our clients now intend to proceed to arbitration in accordance with Article 17(2) of the OIC Investment Agreement. We shall, therefore, write to you shortly pursuant to Article 17(3) of the Agreement, identifying the name of the arbitrator our clients intend to appoint. The balance of the requirements of Article 17(3) are satisfied by the details set out in the Notice,” the law firm stated.
The notice further stated that proceeding to arbitration without further delay has become necessary because of the significant and ongoing financial, regulatory, and reputational harm being sustained by the investors and their investment in Pakistan. These include:
(i) the continued failure to give effect to the 2025 Multi-Year Tariff determinations issued by NEPRA and the ongoing unlawful review proceedings initiated by CPPA-G under government instruction;
(ii) The continued erosion of K-Electric’s financial position due to non-implementation of lawful tariff determinations and delays in payment of tariff differential subsidies and other government dues;
(iii) the continued inaction of the Securities and Exchange Commission of Pakistan, the State Bank of Pakistan, and the Federal Investigation Agency regarding the regulatory breaches and transactions described in the notice; and (iv) The loss of value and impairment of the investors’ governance rights in K-Electric and their related entities. In addition, Steptoe enclosed a letter sent by AJPL and Denham to the Board of Directors of K-Electric on November 9, 2025.
In that correspondence, AJPL and Denham formally objected to steps aimed at convening a board meeting and altering the management of the company, including the proposed appointment of a new Chief Executive Officer. According to the investors, such steps, if implemented, would violate existing orders of the Sindh High Court and directly prejudice their rights and the value of their investment in Pakistan.
The Government of Pakistan, as a shareholder and through its nominated directors on K-Electric’s Board, has been fully aware of these actions and has taken no steps to prevent them. This continued inaction, occurring after the service of the notice, represents an ongoing and aggravated breach of the State’s obligations to provide fair and equitable treatment, maintain legal stability, and refrain from measures impairing the management and operation of the investment.
The investors maintain that they have acted at all times in good faith and in compliance with the orders of competent courts. They expect the government to do the same and to ensure that its nominees and agencies refrain from any action that may further exacerbate the dispute, including changes to K-Electric’s management.
“Unless the Government of Pakistan communicates a proposal for immediate negotiations and identifies, by close of business on November 14, 2025, a duly authorized representative empowered to engage in settlement discussions, the investors will proceed to constitute the arbitral tribunal in accordance with Article 17(3) of the OIC Investment Agreement,” the law firm added. It remains unclear whether the government has responded to the notice.
A message was sent to Minister for Power Sardar Awais Ahmad Khan Leghari to verify whether he had received any notice from Steptoe. He did not respond.
The law firm reiterated that the investors reserve all their rights and remedies under international law, the OIC Investment Agreement, and Pakistani law. Nothing in the correspondence should be construed as a waiver or limitation of those rights, nor as an acceptance of any measures, omissions, or conduct by the Government of Pakistan or its organs.
“We again urge the Pakistani authorities to engage constructively and in good faith so that these issues may be resolved amicably and without the need for further proceedings,” the law firm concluded.
